...Just look at the daily volume on some of these high priced stocks - unlike many microcaps they trade millions of shares. This is called liquidity - you know it's easy to get in and easy to get out of a position. Many microcaps suffer from lack of liquidity, however, they have lower entry prices with many under $5, making them also, technically, penny stocks.
Even in the microcap and penny stocks, certain stocks attract more investors than others. As a trader, I was drawn to liquidity. As an investor, I am drawn to great management and a good story. Either way, I do not want to invest in an overvalued stock. After all aren't we looking to get in low and sell high?
There is the great debate - buy high and try to sell higher into liquidity; Or, buy low, hang around a while, and sell higher later? The true difference between trader and investor is this simple nuance. Much more due diligence is required to find the diamond in the rough.
'Stock-flation' is easier because with so much volume you figure someone before you did the tireless due diligence required. From experience, following the herd can get you trampled on the way out. Doing the tedious work and becoming a believer first is like being there when the elephant takes the first step in the stampede.
It may be worth investing in MicroCaps, rather than trading large caps - are you an investor or are you trader? How many shares of Google can you afford?
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